Question

Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools: Cost Quantity/Amount Quantity/Amount Assigned to Consumed by Consumed by Activity Cost Pools Cost Driver Pool Standard Floor Mat Line Deluxe Floor Mat Line Material handling Number of moves $ 1,656.00 32 moves 60 moves Quality control Number of inspections $ 9, 108.00 600 inspections 780 inspections Machine maintenance Number of machine hours $12,002.00 3,050 machine hours 4,010 machine hours Required: 1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system. 2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line. 3. Determine the amount of overhead Schell will assign to the Deluxe product line. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 and 3 Calculate the activity rates for each cost pool assuming Schell uses an ABC system. (Round your answers to 2 decimal places.) Activity Rate Material Handling per Material Move Quality Control per Inspection Machine maintenance Der Machine Hour

Answer 1

Ans. 1	*Calculation of Activity rate :
	Activity cost pools	Cost assigned to Pool (a)	Total activity (b)	Activity rate (a/b)
	Material handling	$1,656	92	$18.00
	Quality control	$9,108	1380	$6.60
	Machine maintenance	$12,002	7060	$1.70
	*WORKING NOTES:
	*Calculation of Total activity :
	Activity cost pools	Cost driver	Standard (a)	Deluxe (b)	Total activity (a+b)
	Material handling	Number of moves	32	60	92
	Quality control	Number of inspections	600	780	1380
	Machine maintenance	Number of machine hours	3050	4010	7060
Ans. 2 & 3		Total Overhead assigned
	Standard floor mat line	$9,721
	Deluxe product line	$13,045
	Overhead cost assigned = Activity rate * Cost drivers by product
	*Calculations for overhead cost assigned:
			Cost drivers by product	Overhead cost assigned
	Activity cost pool	Activity rate (a)	Standard (b)	Deluxe ©	Standard (a*b)	Deluxe (a*c)
	Material handling	$18.00	32	60	$576	$1,080
	Quality control	$6.60	600	780	$3,960	$5,148
	Machine maintenance	$1.70	3050	4010	$5,185	$6,817
	Total Overhead Cost Assigned				$9,721	$13,045